Wait or Make a Move? The Fed and Gold Prices

The FOMC announcement tomorrow afternoon could send gold to new highs.

Of course, this shouldn’t come as a surprise. The price of gold is often volatile around Fed days.

For example, gold spiked $60/oz. right after the FOMC meeting in July. After the June meeting, it dropped $48 in two days. And after rallying $50/oz. In the days prior to the meeting in May, gold spent the next two weeks losing more than $100/oz.

But here’s why this week’s meeting could trigger a larger-than-average move…

First, take a look at this chart…

Similar to the chart of the S&P 500 we looked at last Thursday, gold is forming a “consolidating triangle” pattern. This happens as the price makes a series of lower highs and higher lows.

All the moving averages have coiled together. And all the momentum indicators at the bottom of the chart are in neutral territory.

Energy is building for gold to make a big move.

How big?

Based on the height of the triangle pattern, gold could move as much as $150/oz. higher or lower.

In the days ahead, gold could be trading at new highs near $2,100/oz., or it could tumble back down towards the March low near $1,800.

Just like the S&P 500 chart, though, there is no edge to either side at the moment. Betting on the direction at this point is like betting on a coin flip. 

Most traders are probably better off waiting for gold to break out of its consolidating triangle – making either a move above $1,975 or below $1,925.

One way or another, though, the FOMC announcement on Wednesday is shaping up to be a pivotal event for both the broad stock market and for gold.

Best regards and good trading,

Jeff Clark

Will you be closely following the FOMC decisions?

Let us know your thoughts – and any questions you have – at [email protected].